Thursday, 10 August 2017

Reforming the Soft Tissue Injury (‘whiplash’) Claims Process – A point of view

From its publication in November 2016, the Government’s consultation “Reforming the Soft Tissue Injury (‘whiplash’) Claims Process” provoked much commentary from insurers and professionals who work with personal injury claims. The consultation included 31 questions and for good measure the Ministry of Justice published an accompanying Impact Assessment which raised a further 40-odd questions/calls for data and information. The closing date of 6th January drew much criticism as the pressure was on stakeholders to respond so shortly after the Christmas break.

On 17 January the Financial Secretary to the Treasury announced, in advance of the Government releasing its response to the consultation, that legislation would be started “later this month”.  This is bound to reinforce the general perception that the reforms are a “done deal” irrespective of the views of respondents. 

What’s the problem?   
Despite a reduction in motor personal injury claims in recent years the Government remains concerned about the number and cost of road traffic accident (RTA) related low value soft tissue injury (‘whiplash’) claims. The Government maintains that many whiplash claims are exaggerated or fraudulent, and wishes to reduce the impact (the Association of British Insurers says) this has on motor insurance premiums. The Government believes the amount of compensation currently paid to claimants for these claims is out of all proportion to the level of injury suffered and wishes to reduce the cost of defending the claims and sums of compensation payable to injured parties for Pain Suffering and Loss of Amenity (PSLA). The consultation seeks feedback in response to a raft of measures aimed at reducing motor insurance premium by an average of £40 a year. (it’s such a shame that almost in the same breath the Treasury imposed a further 2% increase in IPT).

The proposed reforms
The consultation questions focused on the following proposals:

·         The removal of compensation for pain, suffering and loss of amenity (PSLA) for minor whiplash
-   entirely or
-   replace by a fixed sum - £400 or £425 where psychological injury forms part of the claim.
·            Other measures
-   To introduce a tariff of payments for PSLA in more significant claims,
-   To raise the small claims court limit to £5,000 making legal costs unrecoverable,
-   To ban settlement of whiplash claims without a medical report from an accredited expert.
·       Views were also sought on related issues such as credit hire, early notification forms, rehab,   and recoverability of disbursements.

Our response
Ø  Damages

In our view it is inconceivable that injured parties in a traffic accident should lose their right to be compensated while those who suffer inconvenience with much shorter term effects (e.g. due to flight or rail delays) are considered more deserving.
With regard to the level of compensation, we cannot understand how £400 was arrived at given that the current Judicial College Guidelines (JCG) determine a median average figure of £1800.   It is our view that victim's compensation should be determined according to the degree of pain, extent of soft tissue damage and the claimant's expected recovery time – not merely the latter.  The JGC (currently edition 13) allow the courts to determine a fair level of damages, and it is unacceptable that the Government should seek to impose a fixed sum on such an arbitrary basis.

For injuries that exceed a duration of six months a tariff of damages is proposed which represent between 22% and 82% of (out of date) JCG figures. It is further suggested that there may be a 20% uplift to the proposed tariff in exceptional circumstances. In addition to seeking an explanation of why the consultation relies on out of date figures we would take issue with the figures proposed whether or not a discretionary uplift is available since the JCG already provides flexibility for courts to determine suitable levels of damages.

The consultation seeks views about whether, (if it should remain possible to seek compensation for pain, suffering and loss of amenity) the “diagnosis” or “prognosis” approach should apply. The former requires claimants to wait for six months before bringing their claim and the consultation acknowledges that the delay will act as a disincentive to the majority of claimants who have genuine injuries.  Our consultation response listed a further five disadvantageous impacts – to all parties -  of adopting such an approach.  It is incumbent upon insurers to investigate and prosecute fraudulent claims, rather than to rely on the Diagnosis approach which would be unfairly detrimental for genuine claimants.

Ø  Raising the small claims court limit

The Government asserts that the small claims track limit will be increased to £5,000.  As the limit was set over 25 years ago it is not unreasonable to consider whether it should be increased, however the certainty of this statement casts doubt on the authenticity of the consultation. The effect of inflation since the last increase produces an index-linked figure in the region of £2,000.  Increasing the small claims track limit to £5,000 will result in 93% of claims that are currently pursued with the help of a lawyer being pursued without legal representation or not at all.

In 2013 the "Transport Committee's fourth report on the cost of motor insurance: whiplash" concluded that;
·         access to justice is likely to be impaired, particularly for people who do not feel
confident to represent themselves and
·         use of the small claims procedure could prove counterproductive in efforts to discourage fraudulent and exaggerated claims and
·         that the proposed reform could create new opportunities for claims management companies.

Ø  Litigants in person

The consultation goes on to seek views on suggested improvements that could be made to provide help to litigants in person and any specific measures that might be introduced in relation to claims management companies and McKenzie friends operating in the personal injury sector.

The expectation that individuals would have the capacity, confidence or appetite to instigate claims following the trauma of an accident is unrealistic. There will clearly be an inequality of arms with genuine claimants viewing the portal (or similar digital system) as a significant barrier to bringing a claim. Vulnerable customers, those for whom English is a second language and anyone falling the wrong side of the “digital divide” will be most adversely affected and therefore an equal opportunities impact assessment must be undertaken.

We are not aware of any work having been undertaken to assess how easily individuals are able to understand the required procedures and engage with the process. The Government does not appear to have based its views on consumer evidence (such as that gathered from focus groups or consumer questionnaires) to gauge how confident potential victims feel about pursuing claims in person. More work should be carried out to properly evaluate how well individuals are able to manage the process.

In our view unqualified and unregulated McKenzie Friends and unqualified CMCs should be banned.
It is widely held that CMCs are to blame for much mischief in the market. Cold-calling activities and mis-use of personal data has created an unpleasant environment for both consumers and insurers.  The idea that the Government should encourage the use of CMCs and paid McKenzie friends is abhorrent.

Ø  Pre-medical offers

The consultation seeks views about imposing a ban on pre-medical offers and asks respondents whether this should apply to all injury claims or just RTA cases.  We support an entire ban. Pre-medical offers fuel the fraud and exaggeration that insurers complain about. Enforcement of the ban could be by the introduction of regulatory or criminal sanctions or designing a mandatory field into the claims notification form to record key information from the claimant’s medical report. Recording the source of referral of claims will shine a light on pockets of fraudulent activity by CMCs.

Ø  Credit car hire

There is a clutch of questions about credit car hire with descriptions of various “models” that describe which party provides and controls provision of a replacement vehicle. Our preference is for the “Industry Code of Conduct” option which thanks to the ABI GTA is basically what we already have. Additionally, insurers already have the opportunity to limit the extent to which their policies will pay for hire charges by drafting suitable limitations into their terms and conditions.    

Ø  Introducing time restrictions

The Government believes that “late claims” (not clear what is meant by this) are more likely to be exaggerated and seeks views on introducing a system of early notification with claimants having a limited period during which to obtain their medical examination. Besides not understanding what is meant by “late claims” we are not aware of any evidence being available to support a correlation       between the time taken to report a claim and fraud. The onus remains with the insurer to identify and challenge fraudulent claims.

Reducing the limitation period to one year for all motor personal injury claims would be an effective brake on CMCs (and paid McKenzie friends) engaging in claims fishing activities and in its 2013-14 third session report "Cost of motor insurance: whiplash" the Transport Select Committee recommend that "the Government explain the rationale for the three-year limitation period and bring forward recommendations for reducing it".

With regard to imposing a time limit for medicals, this could be positive for genuinely injured claimants. Further work should be carried out to study the behaviour of injured claimants to determine a reasonable window of opportunity following the accident during which medical help is sought before a time limit is set.

Ø  Rehabilitation

We refute suggestions that insurers are disadvantaged by mischief arising from the provision of rehabilitation services. Practitioners are bound by their own professional rules of conduct. There is already a Rehabilitation Code in force for many years agreed by both Claimant solicitors and Defendant Solicitors and insurers. This Code is working perfectly well already so there is no need to consider other options.

Ø  Impact assessment questions
Due to the very tight closing date on the consultation we were unable to provide data and responses for all of the questions and due to the length of this article we are not proposing to cover in any depth our responses here.
In summary, if the proposals are introduced, claimants will face higher BTE premiums – possibly in the region of £15 per vehicle as the costs of pursing claims will increase. This will leave many more accident victims under a reformed system uninsured for legal costs and unable to access justice.
We have challenged data supplied by the NHS Litigation Authority and main assumptions used for BTE and non-BTE claimants.
We struggle to understand how insurers will be able to discretely identify the savings from these reforms in isolation from all the other many variables that affect the pricing of premiums. We believe any savings will be “lost” in the various moving parts that make up pricing.  Secondly, we very much doubt whether Insurers will be true to their word given their poor experience of honouring past commitments. The insurance industry promised savings of £90 per motorist pre-LASPOA yet premiums have since risen by 4% despite 6% fewer claims.

These proposals will reduce the availability and increase the cost to injured victims of ATE insurance. ATE policyholders have a high proportion of low socio-economic citizens who cannot afford the alternative BTE products sold as add-ons to Motor and Household insurance products. It will be particularly damaging for non-RTA injury victims where claims are far more complex and variable.  The proposals will result in achieving the exact opposite of advancing equality of opportunity for victims who are currently vulnerable and the most disadvantaged part of society.


Wednesday, 26 July 2017

Important news – Employment Tribunal fees will be scrapped

UNISON have won their Supreme Court challenge against the imposition of Employment Tribunal Fees. The Supreme Court website is about a week out of date and at the time of writing the full judgment is not listed however UNISON has issued a press release.

The introduction of fees, four years ago, is one factor that has contributed to rising claims costs for legal expenses insurers; however the potential costs savings to be realised following the scrapping of fees will be tempered by a potential increase in the volume of claims. UNISON’s victory will not be welcomed by businesses whose vulnerability to be claimed against will return.

We don’t yet know whether fees will be refunded automatically or whether, in the future, it will be possible to charge a lower fee.

UNISON makes a valid point when it says, “We’ll never know how many people missed out because they couldn’t afford the expense of fees. But at last this tax on justice has been lifted.”

ARAG policyholders will not be in the unknown pool of individuals who were deterred from pursing their employment dispute as their decision to take out Family Legal Solutions has given them protection against the unfair fees. Business policyholders who settle fees or are ordered to pay them have also been covered.     

ACAS’s 2016-17 report shows that around 1800 requests for early conciliation are received each week on average. Just below 50% of cases settle through ACAS early mediation and avoid being escalated to a hearing. ARAG policyholders have the reassurance of legal representation throughout early conciliation and beyond.

In relation to employment disputes, the fees have enabled the Government to save around one-third of the costs needed to run employment tribunals. Since introducing fees for employment claims other tribunal jurisdictions have introduced a fee system. For example, low fees of £100 for an application/ £200 for a hearing are payable for claimants seeking dispute resolution through the Property Chamber of the First Tier Tribunal. This level of fee seems much fairer and it’s possible the employment tribunals could adopt something similar.

Aside from charging fees in tribunals, did you know that last year HM Courts & Tribunal Services turned a profit of £100m through the imposition of “enhanced court fees”?  Enhanced court fees apply where court fees are set at a level that exceeds the state’s cost of running a case. This in effect turns courts into profit centres.  We deal with a number of landlord repossession claims and the last hike in fees increased court fees for landlords by 20%.  As tribunal fees have been judged to be unfair surely these enhanced fees are also unfair? 

ARAG’s vision is that all citizens should be able to afford to assert their legal rights and we exist to protect consumers, landlords and businesses against incurring heavy expenses to make or defend a claim. While the abolition of employment tribunal fees is welcome news for employees we will keep a close eye on the impact the decision might have on our business policyholders and we remain concerned at the high cost of bringing other types of claim. 

Thursday, 13 July 2017

Unrepresented struggle with employment tribunals

I was surprised by the harsh line taken by the employment tribunal and employment appeal tribunal in a case summary prepared by James English of Hempson’s Solicitors and circulated by barrister Daniel Barnett in his excellent employment law bulletin.

The Claimant brought several claims, including constructive dismissal, against his former employer.

Perhaps he didn’t have legal expenses insurance because he initially contacted ACAS for Early Conciliation without any legal representation.  The claimant named a director of the business as the party he wished to make his claim against (the Respondent). It seems that in this case matters could not be resolved through ACAS Early Conciliation and the claimant instructed solicitors to prepare his Claim Form to pursue the matter at tribunal.

The solicitors correctly named the claimant’s ex-employer, 'SNA Transport Limited' as Respondent.  The employment tribunal rejected his claim as the Respondent had not been correctly identified on the Early Conciliation Certificate. His solicitors applied to the tribunal to reconsider that decision on the basis that the use of the director's name was a "minor error", which (under the rules) allows a tribunal to overlook it.

The employment tribunal rejected that application taking the view that confusing the director with the company was not a minor error, and it had been right to reject the claim. The Claimant appealed.

The Employment Appeal Tribunal, although sympathetic, rejected the Claimant's application. It said that a two stage test should be applied. Firstly, was it a minor error? If not, the claim would be rejected. Secondly, if it was, the tribunal should go on to consider whether or not it was in the interests of justice to allow the claim to proceed. Although in principle the distinction between a natural and a legal person could amount to a minor error, in this case it did not. Each case should be considered on its facts, and as there was no error in the tribunal's Judgment, the Claimant's appeal was dismissed.

I’m disappointed about this decision as it’s an easy mistake for someone who is acting without legal representation to make.
The case does however underpin the value of legal expenses insurance for ACAS Early Conciliation.  Although the system was designed with the intention that employees should negotiate without legal assistance it is not free of obstacles. If this claimant had taken out LEI, the error in completing the ACAS form would have been avoided, allowing him to pursue his action at tribunal. Additionally, the insurance would have covered the Tribunal fees and legal costs incurred.

Monday, 10 July 2017

Elite in run-off

After the announcement this week that Elite Insurance Company has stopped writing new business, ATE Sales Manager Mike Knight, questions where the next market shock might emerge.

It is almost a year since my colleague Paul Hurley wrote a similar post to this, commenting on the demise of AU Insurance Services, after the small ATE specialist was forced into administration. His words then seem almost eerily prophetic now:

 “Whatever pushed AU Insurance Services into administration, it wasn’t the first small ATE provider to fail, and it won’t be the last. But bigger firms could also be finding the current climate difficult…”

The circumstance of AU’s relatively sudden demise and Elite’s apparently measured decision to move the company into run-off are, of course, very different and the causes may be too. Elite certainly isn’t one of the “…smaller, niche businesses with most or all of their eggs in the ATE insurance basket.” that Paul described last August.

None of us can take any pleasure in the troubles faced by one of our more significant and respected competitors. Aside from the personal difficulties that will now face many of Elite’s staff, some of whom we know well, we also have to consider the uncertainty that such a high profile exit will bring to a market that has faced more than its share of challenges in recent years.

Elite is a sizeable business with multiple offices in several countries and an insurance offering that stretches well beyond its ATE and BTE legal expenses policies. So, it is impossible to say to what extent the challenging ATE market has contributed to the company being forced to make this decision.

Nonetheless, it is hard to imagine that the combination of LASPO, increased regulation and even successive insurance premium tax hikes, haven’t played some part, not to mention the uncertainty surrounding EEA passporting rules - under which Gibraltar-domiciled Elite has operated in the UK - as a consequence of Brexit.

Solicitors will be understandably nervous in the wake of such a high profile departure, and many will be wondering “what next?” That, of course, is impossible to predict, but all lawyers offering ATE cover should satisfy themselves that they are at least minimising any risk to their client, and ultimately to their own firm.

That means knowing not just the company they are dealing with but also asking questions about the ultimate underwriter of the policy.

While based and regulated in Gibraltar, Elite had at least stood the test of time and was more transparent than many of its competitors. Last December, the company even went so far as to secure an independent assessment of its financial strength, from a respected ratings agency. The security behind that ‘BBB’ rating may not have averted this outcome, but it should give partners some confidence that Elite’s promise to meet its obligations to policyholders and creditors should be fulfilled.

Whenever and however the next ATE provider exits the market, the solicitors and their clients may not be so lucky.

Friday, 30 June 2017

It’s been a busy couple of weeks for our ATE Sales team – Mike Knight, ATE Sales Manager

First up was AvMA’s Annual Clinical Negligence Conference followed, a week later, by the APIL Advanced Brain and Spinal Cord Conference. Both exhibitions are regularly in our events calendar as they provide an invaluable opportunity for us to connect with new prospects and re-connect with our current partners. 

Both events were extremely busy for us, so apologies to anyone who didn’t get the chance to speak to us on our stands, please do contact us below if you would like a chat! Even though each event has a different demographic of delegates, our message is always the same.

For more than a decade, ARAG has led the way in delivering innovative after-the-event insurance solutions to law firms throughout the country. Many will talk of ‘access to justice’, but ARAG is still driven by its founding principle, more than 80 years old, that “…every person should be able to assert their legal rights, not just those who can afford it.”

Nowhere is this principle more important than in our mission to ensure justice continues to be accessible to those who have sustained severe and sometimes catastrophic injuries. At a time when claimant firms and their clients have been confronted with successive challenges, seemingly perpetual reform and shifting regulatory and market conditions, ARAG has stood firm, developing and adapting products to satisfy increasingly demanding requirements, especially in the personal injury and clinical negligence sectors.

The design of our Recourse range of after-the-event solutions has always focused on simplicity. Products that a solicitor can easily explain and a client can readily understand; products free from complex underwriting mechanisms and onerous conditions; products, put simply, that work.

As a result, we are regularly shortlisted for a string of awards, from Personal Injury Insurance Provider of the Year to Legal Expenses Team of the Year, ARAG has been recognised as the outstanding provider of legal expenses insurance solutions for law firms and their clients.

I always enjoy attending events like those put on by AvMA and APIL as they offer a perfect mix of business and networking. Then again, maybe that’s why I have now decided to take on the challenge of Dry July!

The idea of going alcohol free during a summer month of BBQ’s, sporting events and corporate entertaining is not going to be easy but it is for a great cause and a charity close to our hearts at ARAG; FOCUS. The motivation to stay off the alcohol and enjoy a range of non-alcoholic beverages throughout the month comes from the knowledge that any donations received will enable the charity to invest in projects that make hospitals better. Their aim is to create a comfortable and positive environment for all their patients and staff, investing in improvements to buildings, state of the art equipment and extra care over and above that provided by the NHS. If you would like to show your support, please click here

Going forward, we are supporting the St John’s Chamber and AvMA Charity Dinner in Bristol on the 21st September and exhibiting at the APIL Clinical Negligence Conference in Brighton on the 5th and 6th of October – I hope to see you there!

Contact details:

Mike Knight, ATE Account Manager


Mail: 9 Whiteladies Road, Clifton, Bristol, BS8 1NN

Mobile: 07795 636391